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Friday, April 27, 2012

Steady state economy

A steady state economy is an economy of relatively stable size. It features stable population and stable consumption that remain at or below carrying capacity. The term typically refers to a national economy, but it can also be applied to the economic system of a city, a region, or the entire planet. Note that Robert Solow and Trevor Swan applied the term steady state a bit differently in their economic growth model. Their steady state occurs when investment equals depreciation, and the economy reaches equilibrium, which may occur during a period of growth.

Limits to economic growth

Development of steady state economics (sometimes also called full-world economics) is a response to the belief that economic growth has limits. Macroeconomic policies in most countries, particularly those with large economies as measured on a GDP scale, typically have been officially structured for economic growth for decades. Given the costs associated with such policies (e.g., global climate disruption, widespread habitat loss and species extinctions, consumption of natural resources, pollution, urban congestion, intensifying competition for remaining resources, and increasing disparity between the wealthy and the poor), some economists, scientists, and philosophers have questioned the biophysical limits to growth, and the desirability of continuous growth.
Economic growth in terms of a modern state economy is an increase in the production and consumption of goods and services. It is facilitated by increasing population, increasing per capita consumption, or both, and it is indicated by rising real GDP. For millennia most economies, in the current sense of the term, remained relatively stable in size, or they exhibited such modest growth that it was difficult to detect. Proponents of steady state economics note that the general transition from hunter-gatherer societies to agricultural societies resulted in population expansion and technological progress. From this they stress that the industrial revolution and the ability to extract and use dense energy resources resulted in unprecedented exponential growth in human populations and consumption.
Doubts about the long run prospects for continuous growth in the industrial age are commonly described as beginning around the publishing of An Essay on the Principle of Population in 1798 by Thomas Robert Malthus.  Although many of Malthus's empirical claims and theoretical assumptions have since been discredited, his broader concerns have remained influential, from eugenicis and similar pseudo-scientific racism to more mainstream views. The modern debate on the limits to growth was kicked off in 1972 by The Limits to Growth, a book produced by the Club of Rome. The Club of Rome developed computer models and explored scenarios of continuing economic growth and environmental impacts. Their original analysis and several follow-ups specified planetary limits to growth.

Additional studies and analytical tools corroborate much of the Club of Rome's work. For example, the ecological footprint is a measure of how much land and water area a human population requires to produce the resource it consumes and to absorb its wastes, using prevailing technology. The Global Footprint Network calculates the world's ecological footprint to be the equivalent of 1.5 planets (as of 2009),  meaning that human economies are consuming 50% more resources than the Earth can regenerate each year. In other words, it takes one year and six months to regenerate what we consume in a year. This sort of ecological accounting suggests that economic growth is depleting resources at a rate that cannot be maintained.


The benefits of a steady state economy can be grouped in three categories: environmental, lifestyle, and moral. Environmental benefits stem from the establishment of a steady state economy at a sustainable scale. An economy with stable population and consumption features decreased liquidation of natural resources and less waste deposition in the environment. Such an economy that respects biophysical limits does not excessively disrupt natural ecosystems and ecosystem services. It is sized to balance with nature and protect the life-giving resources and processes of the planet.
The lifestyle benefits of a steady state economy are numerous. Life is downshifted as overconsumption, congestion, sprawl, and unfair trade practices[dubious – discuss] fade away. Efficiency is still valued, but the tasks for which we seek maximum efficiency are more carefully considered. People have more time and inclination to focus on community, relationships, sufficient consumption, and other important life matters.
Establishment of a steady state economy also can provide significant moral benefits. First, on a planetary scale, limiting growth in nations that enjoy high levels of per capita consumption would leave more room for economic growth in those nations where citizens are getting by on low levels of consumption. In the long run, preventing over-consumption in the present leaves greater opportunities for future generations to meet their needs.Finally, limiting growth can lower the percentage of planetary resources appropriated to human economies, resulting in more room for nature and continued evolution of ecosystems and species.

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